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This testimony discusses our work on factors that will affect the potential economic impact of implementing the legislation applying U.S. immigration law to the Commonwealth of the Northern Mariana Islands (CNMI). Although subject to most U.S. laws, the CNMI has administered its own immigration system since 1978, under the terms of its 1976 Covenant with the United States. The CNMI has applied this flexibility to admit substantial numbers of foreign workers through a permit program for non-U.S. citizens (noncitizens) entering the CNMI. In 2005, these workers represented a majority of the CNMI labor force and outnumbered U.S. citizens in most industries, including garment manufacturing and tourism, which have been central to the CNMI's economy. The CNMI also has admitted tourists under its own entry permit and entry permit waiver programs and has provided various types of admission to foreign investors. As we have reported previously, the CNMI faces serious economic challenges, including the decline of garment manufacturing and fluctuations in tourism. The recent immigration legislation amends the U.S.-CNMI Covenant to establish federal control of CNMI immigration and includes several provisions affecting foreign workers and investors in the CNMI during a transition period that ends in 2014. The Secretary of Homeland Security decided to delay the start of the transition period for 180 days, from June 1, 2009, to November 28, 2009, as allowed under the law in consultation with the Secretaries of the Interior, Labor, and State, the Attorney General, and the CNMI Governor. Unless otherwise noted, "transition period" refers to the period beginning November 28, 2009, and ending on December 31, 2014. During the transition period, the Secretary of Homeland Security, in consultation with the Secretaries of the Interior, Labor, and State, as well as the Attorney General, are responsible for establishing, administering, and enforcing a transition program to regulate immigration in the CNMI. This program will provide foreign workers temporary permits to work in the CNMI (CNMI-only work permits); the number of these permits must be reduced to zero by the end of the transition period or the end of any extensions of the CNMI-only work permit program. The legislation also establishes a joint visa waiver program by adding the CNMI to an existing visa waiver program for Guam visitors. The legislation's stated intent is to ensure effective border control procedures and protect national and homeland security, while minimizing the potential adverse economic and fiscal effects of phasing out the CNMI's own foreign worker permit program and while maximizing the CNMI's potential for economic and business growth.

The potential impact of the legislation's implementation on the CNMI's labor market, and therefore on its economy, will largely depend on decisions that the U.S. Departments of Homeland Security (DHS) and Labor (DOL) make in implementing the CNMI-only work permit program. DHS will decide on the number of permits to allocate each year, the distribution of the permits, their terms and conditions, and the permit fees; DOL will decide whether and when to extend the CNMI-only permit program past 2014. The interaction of the rate and timing with which DHS reduces the available number of permits and the timing of any DOL extensions of the program will significantly impact the availability of foreign workers; however, we reported in August 2008 that federal agencies had not yet identified an interagency process to coordinate these decisions. Although modest reductions in CNMI-only permits for foreign workers would cause minimal impact, any substantial and rapid decline in the availability of CNMI-only work permits would have a negative effect on the economy, given foreign workers' prominence in key CNMI industries. However, because key federal sources of labor market data do not cover the CNMI, the agencies may have difficulty obtaining the data needed to make decisions. At the same time, the decline in the garment industry, challenges to the tourism industry, and the scheduled increases in the minimum wage may reduce demand for foreign workers, lessening any potential adverse impact of the legislation on the CNMI's economy. Any impact of the legislation on the CNMI's tourism sector will depend largely on DHS decisions about the countries to be included in the joint CNMI-Guam visa waiver program. The legislation's impact will be minimal for tourists from countries included in the joint visa waiver program. However, increases in costs and time associated with obtaining visitor visas, likely for countries not included in the joint program, could influence tourists from those countries to choose destinations other than the CNMI. At present, most CNMI tourists are from Japan and South Korea, both of which will probably be included in the joint visa waiver program because they currently are included in the Guam visa waiver program. China and Russia are currently not included in the Guam visa waiver program and are excluded under a DHS interim final rule for the joint visa waiver program; they are therefore most likely to be affected by the legislation. They account, respectively, for about 10 percent and less than 1 percent of CNMI tourist arrivals but are nevertheless considered important markets. If China and Russia are not included in the joint visa waiver program, tourists from these countries will face increased visa fees, more time-consuming procedures, and uncertainties related to possible visa refusal. The legislation's potential impact on CNMI foreign investment will depend, in part, on key DHS decisions regarding foreign investor entry permits; however, lack of data makes it difficult to assess the likely impact of these decisions and may hamper federal decisions. In implementing the legislation, DHS will decide whether to grant holders of several types of CNMI foreign investor permits "grandfathered" status as U.S. nonimmigrant treaty investors during the transition period. DHS also will decide how long the grandfathered status will be valid. Although available CNMI data suggest that DHS's decision regarding the application of grandfathered status will partly determine the impact of the legislation, critical data--showing, for instance, current overall foreign investment and amounts associated with each type of permit--are not available. This lack of critical data makes it difficult to estimate the legislation's likely impact and limits DHS's ability to make informed decisions regarding the grandfathered status.